Posted on 26th September 2007

Inheritance Crackdown Could Have Implications for Local Families

Anne Elliott, tax specialist and partner at Darlington law firm Latimer Hinks is warning people that they face an inheritance tax headache if records of gifts made to family members are not kept up-to-date and accurate. HM Customs Revenue has announced it will be holding a thorough investigation into how the seven-year gift rule is used and failure to keep precise records of lifetime gifts could be extremely costly. Anne Elliott explains: A gift made seven years before a person dies is generally free of inheritance tax, but gifts made within seven years could be taxed at 40 per cent. The tax authorities plan to study reams of financial information, including bank statement and pension plans to ensure that gifts made during the seven years before the donors death have been declared. Families failing to complete the paperwork accurately could be fined. Anne said: The Revenue is paying 'particularly close attention' to families who use the seven-year gift rule in a bid to reduce inheritance tax. This means it could ask to examine financial information such as bank statements to ensure that inheritance tax declarations have been properly completed. Where it is felt that not all gifts have been declared, the Revenue would be able to issue a fine to recoup the money. This crackdown highlights the absolute importance of maintaining clear, concise and up-to-date records of gifts. Many gifts are not recorded, or people may not realise that a gift they have received is relevant for tax purposes. These entirely innocent mistakes could be very costly in the future. I emphasise to all clients the need to keep a running total of all gifts made with dates, the source of the gifts, if cash, and the recipient. For the family and solicitors to try and reconstruct the records after death is a nightmare. ENDS Notes to Editors Annual revenues from IHT have risen from 1.7billion in 1997 to 3.3billion last year. Government figures show the number of families paying IHT rose 72 per cent in five years. Currently 1.5million properties fall within the IHT net of 300,000.